Sunday, November 25, 2012

The Rational Hubris of Legal Structures as Moral Agents

Posted by Jeff Lipshaw

LogoThe op-ed section of the Boston Globe this morning has a piece extolling the "benefit corporation,"* the statutory basis for which takes effect in Massachusetts this coming Saturday.

The headline reads "Virtue Inc.  Can a new kind of charter give corporations a conscience?"

Interesting. That is a deeply profound question out there at the cutting edge of science and philosophy of mind.  Normally it plays out in questions of the limits (or not) of artificial intelligence.  Can artificial neural nets give computers consciousness - that is, an inner experience and self-awareness?  Indeed, just this past Friday the New York Times contemplated how far "deep learning" programs have progressed in replicating the pattern recognition capabilities of the human mind.   But will consciousness ever be reducible to scientific explanation?  (See, e.g., Daniel Dennett and Douglas Hofstadter for the affirmative and David Chalmers for the negative in that debate.)

Personally, I think an entity has to be conscious to have conscience.  Hannah Arendt said this:

It took language a long time until it separated the word consciousness from conscience, Images and in some languages, for instance in French, such a separation never happened. Conscience, as we use it in moral orlegal matters, supposedly is always present within us, just like consciousness. And this con-science is also supposed to tell us what to do and what to repent of; it was the voice of God before it became the lumen naturale or Kant’s practical reason.
Corporations are legal structures.  By definition they are artificial.  Even if the artificial intelligence people can create a machine that passes the Turing Test and fools me into thinking it's thinking (and therefore might have a conscience), no corporation statute, charter, bylaws, or series of board resolutions is ever going to approach the algorithmic complexity of decision-making and judgment that it would take for a corporation to have either consciousness or conscience. So "virtue" is to lawyers and law as "consciousness" is to programmers and artificial intelligence.  In each case, there's a significant question whether the quality can be captured digitally.  Or to put it otherwise, there's a significant question whether one can reduce the quality to a rule-based model. In either case, it's ultimately oxymoronic because by definition you can't reduce the irreducible.  (Others may well disagree and that itself raises another deep philosophical question, but that's for another time.)  

The idea of programming to the point of Turing Test appearance of thinking or consciousness strikes me as tremendously interesting.  The idea of legislating corporate conscience (versus positive regulation or fiduciary obligations) strikes me as futile.

First, let me address this on a pragmatic level.  I think benefit corporation legislation is a showy political way of attacking a straw man, as exemplified by the Globe author's mistaken channeling of Dodge v. Ford Motor Co., a chestnut case in the early law of corporate fiduciary obligations.  To paraphase the article, if a CEO uses corporate funds to sponsor a charitable cause, to pay factory workers higher wages, or to cut down on pollution because it's the right thing to do, no modern court is going to uphold a claim of fiduciary breach by shareholders as long as there's any rational connection to the corporate business purpose. 

 My friend Kent Greenfield observes (assuming he was quoted accurately) that you don't need a "benefit corporation" in order to allow directors and officers to consider and prioritize the social and environmental impacts of their corporate decision-making.  He's right.  I spent eleven years of my life as a senior executive and general counsel in very large industrial corporations, and we did that all the time (whether or not Kent would agree with me about that!)

I suppose it makes things more transparent - it tells the investors that the entity has only a limited interest in making money.  I don't see anything wrong with that.  Nor do I see anything wrong with organizations like B Lab that certify corporate social responsibility.  If there's a market for it, it will succeed.  I wouldn't put my retirement savings in a benefit or B Lab certified corporationh, but I'm also not pulling my money out of companies that sponsor charitable causes because it's in the long term interest of the shareholders, any more than I'm pulling it out of companies that increase the quality of the break room coffee in the interest of employee morale.

In short, as to the form itself, meh.

Second, and more fundamentally, however, the whole idea of "Virtue Inc." is futile in the way that trying to rationalize oxymorons and paradoxes is futile.  The best way to have a conscience is to be conscious.  That means having an inner awareness of your own ability to decide and to take responsibility.  It means that there's no algorithm when it comes to deciding fundamental issues. That's true in corporate boardrooms, in faculty meetings, in government, or in raising children.

But it's a hallmark of our modernity that, having created rational and scientific institutions like codes and court systems and corporations, we think that consciousness and conscience can be organized and regulated the same way.

Every time we have a perceived crisis of morality, we create new rule-based institutions that tend to close the barn door after the most recent human foible has escaped.  

The best way to be conscientious is to have a conscience.  The best way to have virtue is to be virtuous.  

The hubris of modern thinking is that we can engineer conscience or virtue.  The irony is that the benefit corporation moralists and the C-corp profit maximizers are merely opposite sides of the scientific coin.

* The logo is the property of B Lab, a nonprofit organization that provides a certification that a company meets the organization's standards of social and environmental performance, accountability, and transparency.  One need not be certified by B Lab to be a benefit corporation.

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